Watson Head’s Departure Raises Questions About IBM Moonshot

In late October, Manoj Saxena, the International Business Machines executive overseeing its artificial intelligence Watson technology, told IBM employees on an internal conference that working on Watson was the highlight of his professional life, according to a call transcript reviewed by the Wall Street Journal.

“It’s rare in your life you get a chance to work on an exciting breakthrough technology and then to see the results of it being applied to helping cure cancer,” said Saxena, rallying the hundreds of IBMers who are working to commercialize the Jeopardy-winning computer with cancer hospitals and other businesses. “I couldn’t be prouder of this team.”

Less than four months later, Saxena has left his team at IBM to join The Entrepreneurs’ Fund, a Silicon Valley venture capital fund.

Saxena will continue to serve as an advisor to Michael Rhodin, the IBM senior vice president who recently took over leadership of Watson. In an IBM blog post on Feb. 19, Saxena characterized his departure as a return to his roots in the entrepreneurial community, where he can help the project as a financier.

“I see this as a chance to participate fully in the next phase of cognitive computing innovations,” wrote Saxena, who joined IBM in 2006 after selling a company he co-founded to the giant. “This new role is a natural extension of the work I have been doing to create and expand a Watson ecosystem—championing entrepreneurs who are building a new class of cognitive apps powered by IBM’s Watson cloud platform.”

But his exit from the project at a key point in its evolution is sure to raise new questions about the state of Watson, which IBM has struggled to turn into a big business, according to a page one Wall Street Journal story in January. Saxena didn’t respond to requests for comment. IBM didn’t comment but pointed to the Saxena blog post.

IBM Chief Executive Virginia “Ginni” Rometty has told executives she hopes Watson will generate $10 billion in annual revenue within 10 years, according to the conference-call transcript. She set that target after Saxena said last spring that its business plan would bring in $1 billion of revenue a year by 2018. But Watson had total revenue of less than $100 million as of late October, according to the transcript.

In January, IBM announced it would invest more than $1 billion in a new business unit for Watson, along with a $100 million venture-capital fund to spur more apps built on the technology.

On Wednesday, Rometty challenged attendees of the Mobile World Congress show in Barcelona to create mobile apps that can take advantage of the technology, and said IBM would select three winning applications and provide support to help bring them to market.

Creating an ecosystem of applications based on Watson is a linchpin of IBM’s strategy to turn it into a multi-billion business. Last fall, IBM announced it would open up the Watson technology to software developers in a bid to turn it into a platform much like Apple did with its App Store.

“In my mind, this is the key to growing Watson to $10 billion,” said Saxena on the October conference call. “It is a tall order, but I think we can do it.”

However, the effort is “making a lot of people nervous” at IBM headquarters because it is a new model that has “a high fatality rate,” he said then. “Out of the 300,000 applications in the Apple iTunes store, probably only 100 make money.”

IBM said to date more than 1,500 individuals and organizations have contacted IBM to explore working with Watson, up from 750 late last year.

IBM is working with developers to try to figure out how to build a profitable business on Watson and it hopes to have some answers by the middle of the year. IBM could charge a usage fee or take a cut of the developers’ revenue, much as Apple Inc. does with its app store.

Terry Jones, the founder and former CEO of Travelocity.com and chairman of Kayak.com, said he is really impressed with Watson, “but it takes a while to get your head around it.” Jones said he has been exploring how Watson might be applied to the travel industry.

San Francisco e-commerce consultant and software developer Fluid hopes to build an app that would let consumers ask questions on a retailer’s website, as they would with a sales associate in a store.

Fluid CEO Kent Deverell says the app could help people to more easily find the products they need and prompt more sales. In a statement, Neil Patil, president of Fluid’s software group, said “we are currently working with several interested retail and consumer packaged goods companies to bring this technology to market later this year.”